Wednesday, March 18, 2015

The Brazilian protests over the Petrobras bribery scandal has added to the challenges of Brazil whose economy is in a quagmire. But the vigorous anti-corruption fight by the court and the prosecutors is a good sign of their independence and institutional strength. Brazil, which had faced bigger crises in the past has the potential and the resources to recover soon. But the concern for India is that President Rouseff will pay less attention to foreign policy and partnership with India in its global agenda.

Brazil: protests and Petrobras

On March 14, several hundred thousand Brazilians took to the streets in major cities around the country in protest against corruption. It was a reminder of the 2013-14 protests that overshadowed the football World Cup.

The provocation for this latest protest is the Operation Car Wash scandal in which bribes of around $800 million were shared between politicians and company executives from Petrobras, the national oil company. Dozens of executives from Petrobras and some private sector firms have already been indicted. A senior Petrobras executive Pedro Barusco, who has turned approver, has agreed to return around $100 million from his Swiss bank accounts. Of this, $57 million has already been returned.

The Supreme Court released a list of 54 politicians who had reportedly received bribes. This list includes 21 federal deputies, 12 senators–including the speakers of both houses of the Congress, a former president, a former governor of a state and two ex-cabinet ministers. The court has authorised an investigation and removed the Congressional immunity. If found guilty, the sitting Congressmen will lose their Congressional seats, beside other punishment ordered by the court.

The accused politicians are mostly from the ruling alliance. The senate leader and the speaker of the lower house are both from the Brazilian Democratic Movement Party (PMDB), the largest political party. The six members of the ruling Workers Party (PT) on this list include the treasurer of the party, two ex-chiefs of staff to the president and the former energy minister. According to the approver, PT had received about $200 million in bribes.

While President Dilma Rousseff did not personally respond to the Sunday protests, her justice minister went on national television to say that the government would propose a series of anti-corruption measures and political reforms.

Some protesters called for the impeachment of Rousseff herself, which is not likely. She is known to be incorrupt and has claimed ignorance of the corruption in the company. But she cannot escape moral responsibility since she was the chairperson of the Petrobras board from 2003 to 2010, during which the bribery occurred.

The scandal has hurt Rousseff’s image whose popularity ratings have dropped below 30%. She will face severe resistance from the leaders of both houses of Congress, who are putting pressure on her to help them clear their names from the bribery charges. They have openly announced that they will not let pass easily any legislation proposed by the government. This is bad news for Brazil which desperately needs a number of political and economic reforms.

The corruption issue has compounded the economic situation of the country which suffered a recession in 2014 and is projected to have negative growth in 2015. Inflation is at a 10-year high of 7.7% and currency depreciation is at a 12-year- low.

The Petrobras case is a symptom of the endemic disease of corruption and impunity entrenched in Brazilian society. In the past such things were taken for granted as part of life. In fact, there is an old Brazilian saying that states, “rouba mas faz” (robs but gets things done).

Not any longer.

The judiciary and the prosecutors have become more independent and bold in their investigations with professionalism and in a spirit of crusade. This was evident in the Mensalao Scandal during President Lula’s term when a number of top leaders of his ruling party were punished with imprisonment, fines and suspension from holding public office. In 2014, Brazil passed a Clean Companies Act under which tougher punishment is to be given even to bribe-givers along with bribe-takers and it holds the companies responsible for acts of corruption by their executives. The public protests help and encourage the prosecutors and judges to do their work even more vigorously and zealously. This is a hopeful and healthy sign.

The western media’s exaggerated reports on the Brazilian corruption scandal should be put in a global perspective. The amount involved in the Brazilian scandal is insignificant in comparison to the multibillion dollar fines charged recently by regulators on banks from U.S. and Europe for fraud. Brazil ranks better (69th) in Transparency International’s Corruption Perception Index of 2014 than India (85th) position and China (100th), among 175 countries. In any case, Brazil has come out of bigger crises in the past and has the potential and resources to bounce back soon, just as India got over the 2G scam.

But the concern for India is that President Rousseff will not be able to pay adequate attention to foreign policy, including the strategic partnership with India in IBSA and BRICS to tackle multilateral and global issues, in which India hopes to work with Brazil, since she will be fully absorbed in tackling the internal political and economic challenges.